Appraisal Management Companies

What does everyone think about these new appraisal management companies that are required by Chase and Fifth Third?  It looks like this is the wave of the future in the wholesale/broker business.  The appraisals cost more and you won't find out if there are any value issues until the fee is paid and the appraisal is complete - so much for getting an idea of value from the appraiser prior to spending the clients time and money.

The mortgage bankers I know are not seeing this on the correspondent side and the final fannie/freddie guidelines are not out yet.  I have been told that Fannie will require only that the originator, processor and underwriter not be involved in the ordering- but no requirement to use a appraisal management company.

Any thoughts???

I think the two worst issues we face with AMCs are the long turn times and the possibility of having them assign appraisers who will not research as they should and will just use the first comps they come across.

Just wait until the lender asks for changes to the appraisal.  Additional comps, correcting errors, and the like will take extra time to get back.  We will have to lock our loans for longer periods of time and that will cost our customers more money.

How about the fact that these appraisal companies pay their appraisers about 1/2 than they make now.  They will charge the clients the same amount but we will get less than quality appraisals becuase the appraisers do not have to financial incentive to do the work and research they do right now.  No more free comp checks.  This will cost borrowers more up front and just generate surprises and extra fee's. 

Wells made me do an appraisal review through RELS on a REO purchase in CA and my desk reviewer who made market assumptions was located in New Orleans.  How does that make sense.  This is going to cause a huge mess.  Thats why the Jan 1st date has been pushed back by HUD and Congress.  Unfortaneley lenders are ass-backwards as usual and are starting to implement this policy. 

Obviously I feel sorry for myself as a broker, but I really feel for the appraisers.  Since this law was suggested earlier this year, I know of appraisers that have trying to get approved with the appraisal management companies and they are not accepting any new appraisers.  These are highly qualified professionals who are being run out of business.

For all of you Mortgage Lenders who want to know a simple way to verify an appraisal value read Jack Schlenk Blog "What is the Value of my Property"

jack127:

For all of you Mortgage Lenders who want to know a simple way to verify an appraisal value read Jack Schlenk Blog "What is the Value of my Property"

Jack, your (assuming you are Jack Schlenk) blog does a very simple analysis of appreciation applied to the subject property.  The problem for most originators is not the lack of ability to do the calulations, but the lack of data available to them.  How would you propose determining value if you had no access to the MLS?

The whole idea of appraisal management companies blows!  Even though they claim to "QC" the appraisals they deliver, most of the one's I've seen from those outfits are shoddy in quality.  Beyond that, as mentioned above, they increase the price to the consumer and decrease the amount of money to the appraiser.  Adding insult to injury, they add an extra layer of communication to the process, decreasing the efficiency of the loan origination process.  Bah humbug!

To quote Yogi Berra, It aint over till its over.  To my knowledge, it isnt mandatory yet, is it?  The eternal optimist in me is saying that there might be a chance that HUD might see the forest for the trees this time, but the realist in me is doubtful.  Anybody know who these appraisal corps are owned and managed by?  A little nagging voice in the back of my head seems to hum Bank of America/Wells Fargo/J.P. Morgan, Citi.... I wonder why that is?

Brian,

Worst idea ever. It's again  an over reaction to everything that has transpiried. Sure, there were valuation abuses, but that was only a small part of the problem. Instead of setting a foundation of new appraisal appraches, maybe they need to institue a appraisal system of the CDO's and other credit traunches that these financiers where selling and trading.

The pressure usually comes from the top and stirs the bottom...then they blame the middle.

AGSR.

I'm a mortgage banker and we are required to use them on every deal. The appraisers are paid less so some of them take the money and run so to speak, leaving sub par work. One of the companies we have to choose from DOESN'T EVEN LET YOU ENTER IN A VALUE OF THE HOME when ordering! So it becomes completely hit or miss and you can never talk with the appraiser.

In fact I just received an appraisal where the value came in 4K light so the deal is dead. When I pointed out line item adjustments greater than 10% for things like slightly superior condition and other questionable adjustments, I was told that the appraisal is what it is and I could not ask the appraiser to try and find 4K more in value.

The problem that I am seeing is that appraisals are so subjective from one appraiser to the next. I had one appraiser give a $20K line item adjustment for an open field view and another appraiser give only $5K for the same view on the same property.

It's hard not to throw the appraiser under the bus when it is apparant they took the money and ran so to speak. Especially when the borrower and/or realtor provides comparables sales the appraiser refuses to look at.

I understand the pressure appraiser are under because the appraisal is one of the biggest if not the biggest part of the transaction but there has to be a better way. It seems like a lot of appraiser are just too scared of being blamed or accused of overvaluing a property 

Mike and others,

As an appraiser I must say I applaud your responses regarding the problems facing residential appraisers today, your comments regarding turnaround times and quality are right on.  The new home valuation code of conduct (draft) is out, and it appears that all management companies will be required to eliminate the "estimated value" portion of the appraisal ordering process.  However, USPAP requires the appraiser to review the contract on purchase transactions in the "normal course of business".

I do think there should be a better way to handle that situation, it seems reasonable to get an additional $4,000 for most property considering it would likely be four percent or less of the total value.

On the other hand, I must say that appraisal pressure is systemic.  It seems that there is nearly always a reason to influence the value and brokers/lenders have had a free hand to directly attempt to influence the value conclusion. Other pressure includes influencing the apprasier to ignore obvious repair conditions, say the neighborhood is stable versus declining...the list is long. That needs to change as well.  Unfortunately, management companies are also subject to lender influence. I believe it was the company (eappraiseit?) ordering appraisals for Washington Mutual that was found to be pressuring appraisers for value.

In regard to the following quote:

"It's hard not to throw the appraiser under the bus when it is apparant they took the money and ran so to speak. Especially when the borrower and/or realtor provides comparables sales the appraiser refuses to look at."

I have to agree, quality is important, and it is being reduced is part because of the fee pressure management companies are creating.  I was trying to bid on a territory in my area, where the market fee has been $250 for a typical single family appraisal.  They had appraisers doing these jobs for $150 each!  Needless to say, there was no point in competing for that work.

I can't really say I have a solution, but the hvcc is a good start in at least recognizing the problems appraisers are facing today.

Joseph,

I think it is just wrong that the masses have to pay for the sins of the ... well you know.

As someone who has lived with the reality of a third party AMC for two years now, I thought I would share with you all some of what I have learned.  I will say that this was not something that came about overnight and there was a learning curve between our organization and the AMC.

The AMC that we use ranks appraisers based on turn times and error rate.  They place them in tiers A/B/C and D.  Simply put, appraiser who wish to remain busy respond to orders immediately and set-up appointments usually within hours of receiving the order.  In addition to producing an appraisal in record time, they tend to QC their own work much more closely so that it is not returned to them for corrections.  This has greatly reduced underwriter requests for addendums and additional explanations when their comps do not fit within agency guidelines.  Two of my favorite appraisers that I used to place orders directly with are with our AMC.  I can personally say that the quality and turn time of their work has improved as both wish to remain in the A category.

Invariably you will receive a bad appraisal that you, the Realtor or the borrower feel misses value badly.  When provided with the disputed data, some of these issues are corrected by the appraiser and an amended appraisal is submitted.  In cases where the appraiser disagrees with the dispute items provided and makes no change to the appraisal, the AMC senior appraiser will investigate independently.  If they agree with our conclusions and the appraiser does not, they will order at the expense of the AMC a new appraisal.  If this happens more than once with the same appraiser, they are usually removed from the rotation by the AMC or requested to be removed from our approved list.  Bad appraisers do not last long with this organization!

Though it took some time to get to this level, I find the whole experience much more liberating as I rarely need to worry about an order once it is placed.  My recommendations to anyone going in to a new relationship with an AMC are:  1)  Learn how to read an appraisal and understand adjustments.  2)  Know the person within your organization that is empowered to communicate with, and get things done with the AMC.  3)  Learn who the senior appraiser is within the AMC.  4)  Keep examples of any bad work from appraisers that does not rise to the level of gross incompetence.  Having multiple examples of sloppines or excessive inspections is helpful when you need to get one removed.  5)  If you were an LO that relied on appraisers to help you do "comp checks" go to www.cyberhomes.com and start using that resource instead.

Dean, do you mind sharing what AMC you are using.  At least they seem to have a process to weed out the less desirable appraisers.

Happy holidays everyone,

At the end of the day, I can't stand AMC's or the fact they are even being used. Here in New York, having appraisers "run off" with the money has never been an issue. The over all industry (credit crises) problem was a top down event. The fastest turn around time, is using a reputable appraiser and having access to him/her/them. A good appraiser, even when issuing a comp, may blatantly tell you whether your on target of off.The creation of  an unwanted, unnecessary big brother is only a format for AMC managers and owners to make more money.

I could run this industry better with the guys from MBSlive, three great underwriters, and five LO's. If your a mortgage professional and know your overal lending area, you can pretty much accurate on values. I am just completely turned off by mindless stop gaps put in place by people who caused the problem, saw the problem, made money with the problem, then try and implement procedures to cure the problem by instituting  methods and measures that curbs good lending rather than promoting it.

The problem with REAL ESTATE/FINANCE is the people. Think about a simple closing....how many people are involved from the seller/buyer to the home insurance company! Communication is vital between all parties, AMC's simply close of the lines of communication and retard the process. As I stated before look to the root of the problem, it sure isn't a bad appraiser.

Best,

AG

Juan Boldizsar:

The whole idea of appraisal management companies blows!  Even though they claim to "QC" the appraisals they deliver, most of the one's I've seen from those outfits are shoddy in quality.  Beyond that, as mentioned above, they increase the price to the consumer and decrease the amount of money to the appraiser.  Adding insult to injury, they add an extra layer of communication to the process, decreasing the efficiency of the loan origination process.  Bah humbug!

Juan,

I agree with you 100%.  It is even worse than what you have described.  Not only do they take away your Efficiency but the appraisers efficiency also by demanding very short turn times of 24-48 hours.  This compression of time makes it nearly impossible for an appraiser to manage his drive time, thus making his operation less profitable.  

Folks this is going to get very difficult for you to make a living.  I really do feel for ya'll.

Andrew

charlotte, nc

One of my lenders called me today to let me know that come May 1st all appraisals have to be ordered by the lenders.  Can anyone else confirm this with their lenders? 

Kent, In the Chicago area we have a great MLS system. Are you telling me there is no MLS system in your area.

The local appraisers here can join the MLS system. There are monthly fee.

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You obviously have no clue as to what is going on in the appraisal profession.  Your comments regarding spending the clients time and money before getting an idea of value are completely idiotic.  Appraisers, unlike realtors, have an obligation and are bound by law to provide a thorough analysis of property prior to giving an opinion of value.  The appraisal profession is the same as any other profession.  And consumers of our services, as well as people like you, should understand that when you order a service there are costs associated that MUST BE PAID.  Appraisers are in the business to make money, as is every person providing a service.  Our time is valuable.  If you're a realtor or a mortgage broker, your choice of a profession that doesn't get paid until the deal is  done has no bearing on how an appraiser runs their business.

It's people like you, who have shopped for appraisers to find "FREE" services and an appraiser who will hit your value so loans can be closed that cause problems in the appraisal profession.  Rather than being totally honest with your clients and telling them there is costs involved, you choose to mislead them and ask appraisers to provide an analysis for value without seeing the home in question.  These acts are unethical and you should be locked away, license revoked, and whatever else can be done to you.  Through your indicated actions, people like you and appraisers who assist you with such requests, have been major contributors to today's housing market meltdown.  Appraisers are professional, same as doctors, lawyers, surveyors, etc.  Look up the meaning of the word.

If you don't like the way appraisers run their business, I suggest you find a profession in which you don't have to deal with us.  Actually, you should be working in a manufacturing facility where your impact on any consumers is microscopically controlled.